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Setting up a payment agent in EU

alpakiwi

alpakiwi

Mentor Group Gold Premium
Dec 1, 2016
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#1
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We’re setting up a payment agent entity as payment processor for a third party, which is very offshore and won't be easy to transact with. While it’s not gambling or adult or anything scammy, it is considered high risk. I’ve heard that many people use Cyprus for this purpose, but I noticed that Shopify Payments isn’t available there, and PayPal fees are significantly higher compared to other countries like Romania or the Czech Republic.

Assuming banking is not an issue, is there a specific advantage to using Cyprus over these other jurisdictions? I’d appreciate any insights on this.
 
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#2
It probably doesn't answer your question, but you might find some relevant information here:

HeinzKetchup69

Thread 'Best way to set up company to charge customers Tax Free?'

Is there any company (between the ones listed below) that allow the company to be used to charge clients for services/goods, and then transfer the funds tax free into a foreign company: (e.g: UAE company) without going into illegal tax evasion areas?

For example:
- Irish company used to set up Stripe charges clients
- Profits are distributed from the Irish company into a UAE company either through Dividends OR the UAE company charges the Irish company for services
- The Director would be a resident of the UAE or similar low tax jurisdiction ( such as: Hungary, UAE, Hong Kong, etc...)


Is...
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#3
This one as well:

B

Thread 'EU Country that doesn't Tax Company profits?'

is there any EU country that doesn't Tax, or minimally Taxes, profits that are distributed to the Director and employees of the company that are based in a 0% Income Tax country (UAE) ?

For example:

Citizen of Austria
Living in the UAE
Collecting funds through a company based in the EU and distribute these profits to my self and to my UAE company

The reason why a EU company is required is to comply more effectively with VAT and payment gateways purposes.

Business revenue: $1m a year (profit approx $400K and Director salary of $80K).

I'm not wealthy enough for ultra-complicated set ups...
 
#6
Sols said:
Cyprus is popular because it's popular. It's proven to work. The setup is well understood by the tax authority, lawyers, and service providers. You might occasionally see Malta, Lithuania, or Estonia but they are far behind Cyprus in popularity.
Click to expand...

Some Casinos use UK ltd's as well.

Since audits are not required in Cyprus for a turnover below 200K EUR, I guess the payment agent won't be required to be audited if the only revenue is the 3% of the processed amounts. So if the cyprus company processes for example 5 million eur per year, takes 3% commission, the revenue for the cyprus entity would be 150KEUR.
 
#7
Dandyline said:
Some Casinos use UK ltd's as well.
Click to expand...

I think it was @EliasIT who mentioned they use UK Ltd.'s as well.

Dandyline said:
Since audits are not required in Cyprus for a turnover below 200K EUR, I guess the payment agent won't be required to be audited if the only revenue is the 3% of the processed amounts. So if the cyprus company processes for example 5 million eur per year, takes 3% commission, the revenue for the cyprus entity would be 150KEUR.
Click to expand...

I guess that would depend on how the contracts are structured (if the Cypriot entity becomes part of the supply chain or not).
 
#8
Dandyline said:
Some Casinos use UK ltd's as well.
Click to expand...
Good call. Although less popular since Brexit, as the purpose of the payment agent often is to access EU market.

Dandyline said:
Since audits are not required in Cyprus for a turnover below 200K EUR, I guess the payment agent won't be required to be audited if the only revenue is the 3% of the processed amounts. So if the cyprus company processes for example 5 million eur per year, takes 3% commission, the revenue for the cyprus entity would be 150KEUR.
Click to expand...
I have never worked with a Cypriot payment agent that wasn't audited. They're dead simple to operate and audit.
 
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#11
Dandyline said:
How is the OSS-VAT resolved?
Click to expand...
With the help of a good lawyer/accountant in Cyprus that handles everything for you. You need to structure the company and agreements in such a way that it isn't in scope for VAT.

As @JohnnyDoe so wisely said, speak to someone like @CyprusLawyer101 to iron out the details. Once that's all in place, it's easy to run these kind of companies. Audits should be a complete non-issue.
 
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#12
Sols said:
With the help of a good lawyer/accountant in Cyprus that handles everything for you. You need to structure the company and agreements in such a way that it isn't in scope for VAT.

As @JohnnyDoe so wisely said, speak to someone like @CyprusLawyer101 to iron out the details. Once that's all in place, it's easy to run these kind of companies. Audits should be a complete non-issue.
Click to expand...

Digital services are always in scope for VAT. Question is if the payment agent company or the parent company will declare the VAT.
 
#14
nurredon said:
We’re setting up a payment agent entity as payment processor for a third party, which is very offshore and won't be easy to transact with. While it’s not gambling or adult or anything scammy, it is considered high risk. I’ve heard that many people use Cyprus for this purpose, but I noticed that Shopify Payments isn’t available there, and PayPal fees are significantly higher compared to other countries like Romania or the Czech Republic.

Assuming banking is not an issue, is there a specific advantage to using Cyprus over these other jurisdictions? I’d appreciate any insights on this.
Click to expand...
It all depends on the business activity (which is not stated in your message)
 
#15
The business activity is a perfume dupes setup. I really like @CyprusLawyer101 and will most likely engage him for this regardless. However, PayPal fees are significantly higher compared to Spain, Romania, or the Czech Republic. Additionally, Shopify Payments isn’t available, which means card processing would require extensive custom integrations
 
#16
nurredon said:
The business activity is a perfume dupes setup. I really like @CyprusLawyer101 and will most likely engage him for this regardless. However, PayPal fees are significantly higher compared to Spain, Romania, or the Czech Republic. Additionally, Shopify Payments isn’t available, which means card processing would require extensive custom integrations
Click to expand...
I dont think for such business activity CY payment agent is critical. It can basically be any EU country or even UK as long as it provides you with required payment solutions
 
#17
Clearsky Network said:
I dont think for such business activity CY payment agent is critical. It can basically be any EU country or even UK as long as it provides you with required payment solutions
Click to expand...
I agree! One interesting advantage of setting it up in Cyprus instead of countries like Spain or the UK is that it could make things more challenging when the company receives cease-and-desist letters. There might be fewer lawyers in Europe specializing in representing manufacturers in this jurisdiction, which could work to our advantage
 
#20
nurredon said:
I agree! One interesting advantage of setting it up in Cyprus instead of countries like Spain or the UK is that it could make things more challenging when the company receives cease-and-desist letters. There might be fewer lawyers in Europe specializing in representing manufacturers in this jurisdiction, which could work to our advantage
Click to expand...

In order to reduce the taxable profit in Cyprus, you probably won't want the payment company to become part of the supply chain.
So the payment company probably wouldn't be the right entity to sue - not sure if this would be relevant then.
 
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